The European Commission today proposed to establish
a special "facility for rapid response to soaring food prices in developing
countries". The fund would be worth €1 billion and would operate for two
years, 2008 and 2009. This money would be in addition to existing development
funds and would be taken from unused money from the European Union's
agricultural budget. It would be provided to developing countries which are most
in need, based on a set of objective criteria. The facility would give priority
to supply-side measures, improving access to farm inputs such as fertilisers and
seed, possibly through credit, and to safety net measures aimed at improving
productive capacity in agriculture. The support would be paid via international
organisations, including regional organisations. The proposal falls under the
co-decision procedure and the Commission hopes that Council and Parliament can
reach agreement by November in order not to lose the unused 2008
money.

José Manuel Barroso, President of the European Commission, said: "The
impact of high food prices is particularly severe for the world's poorest
populations. It may put at risk our progress towards the Millennium Development
Goals and exacerbate tensions in poor countries, namely in Africa. This 1
billion Euro facility aims to generate a strong and rapid agricultural supply
response. It is an act of solidarity with the world's poorest but also a
responsible measure to promote stability. It is aimed at increasing agricultural
production in developing countries to combat the effects of soaring food prices.
Such an increase in supply is necessary to fight rising food prices
world-wide."

Louis Michel, Commissioner for Development and
Humanitarian Aid, commented: "The food price rise has hit farmers and
populations in developing countries the hardest. This major cash injection will
help raise agricultural production in these countries by providing farmers there
with the means, such as more seeds and fertilizers, to make a difference across
the medium and long term. This is Europe responding in real-time with effective
actions. This is Europe responding with effective solutions to help farmers in
Africa and in other developing regions."

Mariann Fischer Boel, Commissioner for Agriculture and Rural Development,
said: "It's so important that farmers in the developing world are given the
means to help themselves. Higher food prices can stimulate production in these
countries. I am very pleased with this concrete example of solidarity from
farmer to farmer, which can help to quickly increase production in the
developing world."

Rising food prices in 2007 and 2008 have had negative effects on many
developing countries and their populations. Poverty has deepened for hundreds of
millions of people and recent progress towards achieving the Millennium
Development Goals has been put at risk. Rising food prices have resulted in
riots, unrest and instability in several countries, risking the gains of years
of political, developmental and peacekeeping investments.

However, the new situation could also provide a window of opportunity to
stimulate a supply response from farmers in developing countries. It offers new
income-generating opportunities to bring rural communities out of poverty by
providing incentives for investments and productivity improvements.

At the same time, high agricultural prices have contributed to a reduction of
market expenditure in the 2008 EU budget and to lower estimates for the 2009
budget within heading 2 of the financial framework. The Commission believes this
provides an exceptional opportunity to provide a temporary facility to help
stimulate farming in developing countries.

The Commission expects the positive results of this assistance to include an
increase in agricultural production and food security in assisted countries,
reduced malnutrition rates and reduced food price inflation.

Eligible countries and the share they should receive will be selected on the
basis of transparent criteria. Information provided by the UN Task Force and
international organisations (mainly UN agencies like FAO, WFP, World Bank and
IMF) will be used, and this may be supplemented by country-specific information
obtained from EC Delegations.

While all developing countries are potentially eligible for support,
assistance will be provided to those that are severely affected by the food
price crisis in socio-economic and political terms, have a need for measures to
be taken and which do not have the means or capacity to respond unassisted.

Indicative criteria in selecting countries include reliance on food imports,
food price inflation, and social and fiscal vulnerability. Other financing
available to the country from the donor community will be taken into account, as
well as the country's potential to increase agricultural production. The
Facility also allows for regional-level programmes, covering all developing
countries of that region. Global initiatives may also be financed when
implemented through a regional or international organization.